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Scratchy or distorted? If distorted, a good explanation would be the amplification is higher on the Verizon in which case you would just need to turn your output down. Scratchy as in interference may be the distance to nearest Verizon hub hop is too far... that's all I can think of off the top of my head.

We have seen issues between dial tone providers where we can not call someone or they could not call us. We could call each other on the cell phone, different dial tone provider, but not through our phone system. We contacted our dial tone provider and they got the issue resolved.

I am an engineer for a Telco, and I've seen these kind issues before. There are two likely issues:

1) Whatever channel that Verizon is using to connect to you is passing through a peice of equipment that is faulty. You'll need to contact your Telco provider to resolve this (as the issue can lie within Verizon's network, or a tandem interconnect or LD carrier, which only your Telco provider can hound the parties responsible for the upstream links... but it might require a lot of follow up on your end to make sure that your carrier does their job).

2) If your phone system "transfers" a call from one channel to another (ie, a call transfer... which some phone systems "transfer" the call to an "on-hold" state under the hood), this can cause unpredictable changes in volume gain for the call. Some businesses (including some Qwest call centers for certain internal departments) don't have hold music at all. Other large businesses stuck with this issue replace their hold music with a simple intermittent "beep" to resolve this as well (as silence with an fuzzy beep every once in a while is preferable to listening to bad/fuzzy music).

If this is the case, you'll need to talk to your PBX vendor. Specifically hound them if placing a call on hold transfers the call from one audio channel to another within the PBX (not a T1 channel), or if it simply replaces the audio stream without transferring the call to another channel. If this is the issue, there isn't much you can do about with without changing phone systems unless the vendor is willing to work with you).

Seeing as you have an mp3 player hooked up to it, it very well could be "transferring" the call to your hold music channel.

I've had to deal with this issue on multiple occasions. The first thing I do is take the MP3 and make sure this isn't any clipping due to compression or amplification. Try to adjust the gain on the MP3 instead of using the phone system to amplify the volume. Next try to find a music sample that is consistent as possible in regards to melody and volume. Compression on cell calls has a hard time transmitting complex tones consistently. It will also help to find one that loops well, short into and outro.

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